Analysis of infrastructure financing by debt funds in the EU

Gawlitta, Marcel; Kleinow, Jacob

doi:10.1680/mpal.13.00049

Cited by 6 publications

(2 citation statements)

References 6 publications

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“…The growth of private equity funds during the 1990s spurred the development of private debt as an asset class, since private equity funds relied on substantial leverage to generate returns, thus creating demand for debt finance (Bakie, 2019). After the 2008 Global Financial Crisis, the Basel III/CRD IV regulations reduced banks’ ability to provide large, long-term loans for infrastructure projects (Gawlitta and Kleinow, 2015), allowing private debt providers to enter this segment of the market with less competition. Infrastructure debt offered institutional investors, typically pension funds, insurers and sovereign wealth funds, an opportunity to increase their exposure to infrastructure while retaining the certainty of fixed-income assets that were trading at very low yields (Alves, 2013).…”

Section: Background: Development Of the Infrastructure Asset Classmentioning

confidence: 99%

Infrastructure debt funds and the assetization of public infrastructures

McArthur

2023

Environ Plan A

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Infrastructure has grown rapidly as an alternative asset class, yet many of the complex processes that transform public infrastructures into lucrative financial assets are poorly understood. This article examines investments by an infrastructure debt fund, to show how financial innovations expand and diversify the infrastructure asset class by finding new ways to generate financial returns from infrastructures. Infrastructure debt is an emerging sector of the infrastructure asset class, where private debt funds create assets that generate returns by extending loans or bond financing to physical infrastructures. The analysis uses assetization as a conceptual framework to scrutinise the construction of financial assets, centring the role of rent generation and extraction to show how infrastructure debt funds create financial value. By bringing the performative work of asset construction into dialogue with the political-economic forces enabling rent extraction, the analysis augments existing literature on financialized infrastructures. The findings show how infrastructure debt assets are predicated on multiple rounds of assetization: initially, the essential nature of infrastructure services is exploited to generate and extract monopoly rents as long-term revenue streams, and in turn, debt funds extend claims on these revenue streams to extract rents through interest payments. In this way, infrastructure debt extends the infrastructure asset class and provides a new route to extract rents, raising concerns over the potential of these investment practices to contribute to inclusive regional development and just transitions to mitigate and adapt to climate change.

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Section: Background: Development Of the Infrastructure Asset Classmentioning

confidence: 99%

Infrastructure debt funds and the assetization of public infrastructures

McArthur

2023

Environ Plan A

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“…IDFs have been considered as a mechanism to attract additional debt capital for infrastructure in several regions. The study by Gawlitta and Kleinow (2015) has traced the emergence of IDFs in the European Union. An overview of IDFs worldwide has been provided by Lambert (2014), where he has also argued how setting up of IDFs can contribute to the development of infrastructure in India.…”

Section: Literature Reviewmentioning

confidence: 99%

Innovative financial intermediation and long term capital pools for infrastructure

Annamalai

Hari

2016

JFMPC

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Purpose Developing countries are increasingly looking to private sector investment for infrastructure development. Successful development of private infrastructure projects, however, depends on adequate availability of long-term debt to complement private sector equity. As domestic bond markets in many emerging countries are not very deep, availability of long-term debt funding for infrastructure has been limited. Recently, a new form of financial intermediation has emerged in India with the creation of infrastructure debt funds (IDFs) to create capital pools for long-term debt funding. This paper aims to analyse the effectiveness of IDFs for financing infrastructure projects. Design/methodology/approach This paper uses a case study approach. The case studies were written using both secondary and primary information. Secondary information was obtained from various sources such as policy papers, websites and other published sources. Primary information was obtained from interviews with the top management of three IDFs. Information obtained from multiple sources was triangulated for consistency and correctness. Findings IDFs have emerged as an effective intermediation mechanism for attracting long-term capital by offering a new investment product with appropriate risk-adjusted returns. For the fund seekers, IDFs are able to provide long-term capital at lower rates and higher flexibility. Unlike commercial banks, IDFs are able to add value to the projects apart from funding by periodic monitoring of the projects. Practical implications Creating new forms of financial intermediation can help in reducing the financing gap for infrastructure projects, especially in emerging countries. Originality/value IDFs have been analysed from a perspective of financial intermediation. The effectiveness of IDFs in bridging the funding shortfall has been evaluated from multiple perspectives.

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Perspektiven der Finanzierung von PPP-Vorhaben mit Hilfe von Projektanleihen

Horsch

Fiedler

2015

Aspekte Der Baubetriebslehre in Forschung Und Praxis

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Analysis of infrastructure financing by debt funds in the EU

Cited by 6 publications

References 6 publications

Infrastructure debt funds and the assetization of public infrastructures

Infrastructure debt funds and the assetization of public infrastructures

Innovative financial intermediation and long term capital pools for infrastructure

Perspektiven der Finanzierung von PPP-Vorhaben mit Hilfe von Projektanleihen

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